Following the Civil Justice Council’s working group’s consultation, the much publicised update to the guideline rates will come into effect from 1 October 2021. This represents the first uplift to the guideline rates since 2010.
The new rates will be as follows:
| Grade A | Grade B | Grade C | Grade D |
London 1 | £512 (25%) | £348 (18%) | £270 (20%) | £186 (34%) |
London 2 | £373 (18%) | £289 (20%) | £244 (25%) | £139 (10%) |
London 3 | £282 (14%) | £232 (16%) | £185 (12%) | £129 (7%) |
National 1 | £261 (20%) | £218 (14.%) | £178 (11%) | £126 (7%) |
National 2 | £255 (27%) | £218 (23%) | £177 (21%) | £126 (14%) |
The % figure reflects the increase on guideline hourly rates against the 2010 figures.
Whilst a review of the rates was long overdue and likely to be welcomed by many, as expected, the reception to the rates has also been met with objections. Many receiving parties have suggested that the guideline rates do not go far enough after an 11 year freeze. In opposition, many paying parties have suggested that the new rates are too generous given significant changes to working behaviour as a result of Covid. These changes, namely working from home, have arguably resulted in reduced overheads and are likely to continue to some extent. These concerns were noted by the Master of Rolls who promised a review within the next 2 years.
Whilst the writer would welcome the updated the hourly rates, many questions remain to be answered. Several prominent questions include;
The Client’s location
One notable inference that can be drawn from the updated guidelines is the future application of guideline rates as they pertain to the client’s location and resulting location of the firm of Solicitors.
A common argument for a paying party to raise is the Claimant’s location in seeking to call into question the hourly rates claimed. Given the new parity between national 1 and national 2 rates, conceivably the extent upon which this argument can be deployed is significantly minimised. The writer would suggest that this is a sensible development. Whilst the old A & B factors (namely overheads and profit elements respectively) may once upon a time have been of relevance, today, firms’ overheads are broadly similar and the simple application of geographical location (save for London) provides for little real world application.
Retrospective application
It is unclear how these rates will be applied to costs incurred prior to October 2021. On one hand, it is commonly accepted that the reasoning behind the update and indeed extent of the increase is partially based on the length of time that has elapsed. On the other, absent firm guidance as to the length of any retrospective application, the proper operation of these rates will remain in question for a number of years. The writer would suggest that whilst it is likely that there will be some retrospective effect to costs claimed in the immediate past, for cases that have continued for a number of years a blended rate may be the most appropriate starting point.
Enhancements
A further uncertainty that arises following these updated rates is the Court’s approach to any enhancement to be applied. The working group were keen to emphasise that the increased rates did not prevent a judge, at assessment, from awarding a higher rate if the case warranted it. There can be little doubt that enhancements will continue. However, the scope and extent of these enhancements going forward will remain to be seen. Whilst logically an increased starting point would result in an increased enhancement, undoubtedly, several judges at assessment would have taken the historical nature of the old rates into account in the assessment of any enhancement applied. Whilst the factors of CPR 44.3(4) will continue to have application in the court’s consideration, going forward we may only see limited real terms improvements in the rates allowed. These updated guideline rates may effectively offset a significant element of the court’s consideration as to the extent of enhancements allowed going forward.
London
A notable key change incudes an amendment to the rates applied to London 1 and 2. Effectively, the rates have been constructed with a view to the nature of the work being undertaken whether or not it is conducted in the city. London 1 has been primarily allocated commercial and corporate work whereas London 2 is for all other work. However, given an increased appetite to work from home, arguably this approach again provides little in the way of real world application.
Fixed costs
Whilst not directly relevant, the updated rates call into question the statutory sums prescribed for fixed costs cases. Dependant on the emphasis placed on the guideline rates (as they were), arguably the analysis used in developing the FCR could be considered to now be flawed. These updated rates call into question the reasonableness of the sums prescribed for cases that fall within the fixed costs regime. This is a question that may well begin to pick up steam.
Whilst the updating of the rates is likely to be welcomed by most following such a significant period of stagnation, many questions remain as to their application and the methodology used. Notably, criticism as to the methodology with a focus on changes brought about by Covid are likely to continue to be called into question.
By James Sherwood Costs Lawyer